Tussle over DSE stake ends

Shanghai, Shenzhen now Dhaka bourse's strategic partner

Bangladesh's capital market stepped into a new era yesterday after the stock market regulator gave the green light to the proposal from a Chinese consortium to become the Dhaka Stock Exchange's strategic partner.

The consortium of Shenzhen Stock Exchange and the Shanghai Stock Exchange, which managed to fend off advances from another consortium led by the National Stock Exchange of India for the 25 percent stakes of the DSE, will purchase 45 crore shares for Tk 21 each.

“This will open a whole new window -- foreign investors will now be attracted to the capital market,” said KAM Majedur Rahman, managing director of the DSE, adding that the deal will be inked on May 14.

The country's premier bourse's hunt for a strategic partner began in June last year as part of its conditions for demutualisation in 2013.

Demutualisation separated the bourse's management from ownership, and was a major recommendation of the stock market probe conducted by a government panel in the aftermath of the market crash of 2011.

When the DSE invited tender for strategic partner in June last year, it received a single proposal from a local investor, a consortium of LankaBangla Finance and Delta Life Insurance.

But the DSE board declined the proposal as it was looking for a foreign partner with ample technical knowledge and experience.

Subsequently in November, the DSE floated tender for the second time and got proposals from consortiums from China and India.

The Chinese consortium also offered technical support worth $37 million (about Tk 300 crore). In exchange, it sought for a seat at the DSE board and assured that it will not ask for any return on its investment for 10 years.

In contrast, the Indian consortium offered Tk 6 less for each share. It also offered technical support but it did not give a monetary value. In exchange, it wanted two seats at the DSE board.

The DSE board unanimously went with the proposal from the Chinese consortium.

Upon sensing that their offer will not be selected, Vikram Limaye, managing director and chief executive of the NSE, rushed in to Dhaka and got straight into lobbying with the Bangladesh Securities and Exchange Commission, which has the final word on the matter.

Soon after, the BSEC called the DSE's chairman and MD and asked them to further scrutinise both the proposals -- a move that was viewed by many as the stock market regulator doing the bidding for the Indian party.

It created a loggerhead between the DSE and the BSEC.

The Chittagong Stock Exchange, which also went through demutualisation, is also on the hunt for a strategic partner.